Let The Welter Appraisal Group help you figure out if you can cancel your PMI
It's widely understood that a 20% down payment is the standard when purchasing a home. The lender's liability is generally only the difference between the home value and the amount remaining on the loan, so the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and natural value fluctuations in the event a borrower is unable to pay.
Lenders were taking down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the added risk of the minimal down payment with Private Mortgage Insurance or PMI. This supplementary plan guards the lender if a borrower defaults on the loan and the value of the property is lower than what is owed on the loan.
PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and many times isn't even tax deductible. Unlike a piggyback loan where the lender consumes all the losses, PMI is profitable for the lender because they collect the money, and they get the money if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can buyers keep from bearing the expense of PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law promises that, at the request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent. So, wise home owners can get off the hook sooner than expected.
It can take many years to arrive at the point where the principal is only 20% of the initial loan amount, so it's necessary to know how your home has grown in value. After all, all of the appreciation you've acquired over the years counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends indicate plunging home values, realize that real estate is local. Your neighborhood may not be following the national trends and/or your home may have secured equity before things calmed down.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At The Welter Appraisal Group, we know when property values have risen or declined. We're masters at determining value trends in Oakhurst, Monmouth County and surrounding areas. When faced with figures from an appraiser, the mortgage company will generally eliminate the PMI with little trouble. At which time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: